Total Quality Logistics, L.L.C. v. JK & R Express, L.L.C.

Citation164 Ohio St.3d 495,173 N.E.3d 1168
Decision Date22 December 2020
Docket NumberNo. 2019-0267,2019-0267
Parties TOTAL QUALITY LOGISTICS, L.L.C., Appellant, v. JK & R EXPRESS, L.L.C., Appellee.
CourtUnited States State Supreme Court of Ohio

Bricker & Eckler, L.L.P., and Jeffrey P. McSherry, Cincinnati, for appellant.

Roetzel & Andress, L.P.A., and Chad M. Sizemore, Cincinnati, for appellee.

French, J. {¶ 1} We accepted the discretionary appeal of appellant, Total Quality Logistics, L.L.C. ("TQL"), to consider whether the common-law requirements set out in Globe Indemn. Co. v. Schmitt , 142 Ohio St. 595, 53 N.E.2d 790 (1944), for determining whether an indemnitee may recover against an indemnitor when the indemnitee has settled a claim without the indemnitor's involvement, apply when the rights of the parties are governed by a contract that includes an indemnification provision. We determine, as we do today in Wildcat Drilling, L.L.C. v. Discovery Oil & Gas, L.L.C. , 164 Ohio St.3d 480, 2020-Ohio-6821, 173 N.E.3d 1156, that the Globe Indemn. Co. requirements do not apply when the parties express a clear intent to abrogate those common-law requirements in their contract. But because the Twelfth District Court of Appeals applied the Globe Indemn. Co. requirements without considering whether the parties intended to abrogate those requirements, we reverse its judgment and remand the cause to the trial court for further proceedings consistent with this opinion.

I. Background
A. TQL and JK & R enter into a broker-carrier agreement for JK & R to transport TQL's customers' products

{¶ 2} TQL is a freight broker that arranges for the transportation of its customers' freight and cargo from one location to another. Appellee, JK & R Express, L.L.C. ("JK & R"), is a motor carrier that transports freight and cargo. TQL entered into a broker-carrier agreement with JK & R for JK & R to provide motor-carrier-transportation services to TQL's customers. The broker-carrier agreement included the following provisions:

8. CARGO LIABILITY AND CLAIMS . * * * [JK & R] is fully responsible and liable for the freight once in possession of it, and the trailer(s) is loaded, even partially, regardless of whether a bill of lading has been issued, signed, and/or delivered to [JK & R]. [JK & R's] responsibility/liability shall continue until proper and timely delivery of the shipment to the consignee and the consignee signs the bill of lading or delivery receipt evidencing successful delivery.
* * *
10. INDEMNIFICATION . [JK & R] agrees to defend, indemnify, and hold [TQL] and [customers] harmless from and against any and all claims or liability (including, without limitation, Workers' Compensation claims), arising out of or in any way related to [JK & R's] negligence, willful misconduct, acts, omissions, or performance or failure to perform under this Agreement, including, without limitation, claims or liability for cargo loss and damage, theft, delay, damage to property, and bodily injury and/or death. Except for Workers' Compensation claims, [JK & R] shall not be required to indemnify any party (including [TQL]) for claims or liability that are directly and solely caused by the negligence or willful misconduct of that party.

(Boldface, capitalization, and underlining sic.)

{¶ 3} After the parties had entered into the broker-carrier agreement, TQL arranged for JK & R to transport apples for TQL's customer, Contél Fresh, from Washington to Missouri and New Jersey. JK & R successfully picked up the apples in Washington, but while it was en route to Missouri, JK & R's trailer carrying the apples caught fire and the apples were destroyed, which constituted a complete loss of the freight.

B. TQL pays Contél Fresh for the freight loss by offsetting the amount of the loss against open invoices

{¶ 4} After the loss of the apples, Contél Fresh submitted an invoice to TQL for $86,240. TQL offset $86,240 of its open invoices to Contél Fresh to pay Contél Fresh for the loss.

{¶ 5} In addition to its loss because of the destruction of the apples, TQL experienced the loss of its freight-brokerage services in the amount of $6,500, because JK & R did not successfully deliver the apples. JK & R provided partial payment to TQL in the amount of $9,074, because TQL applied JK & R's open invoices to the amount owed to TQL. The total amount owed by JK & R after that payment, according to TQL, was $83,666.

C. TQL sues JK & R for the balance owed to it under the broker-carrier agreement

{¶ 6} TQL filed a complaint against JK & R for breach of contract or, in the alternative, unjust enrichment and promissory estoppel to recover the amount owed to it under the broker-carrier agreement. The parties filed competing motions for summary judgment.

{¶ 7} TQL argued that it was entitled to the balance owed under the broker-carrier agreement because JK & R had breached the contract. JK & R argued that TQL was not contractually compelled to pay Contél Fresh, nor was it compelled to pay Contél Fresh by a judgment of a court. JK & R maintains that because TQL had no obligation to pay for the losses relating to the apples, TQL voluntarily settled the claim merely as a business consideration and thus has failed to satisfy the second requirement under Globe Indemn. Co. , 142 Ohio St. 595, 53 N.E.2d 790. JK & R argued that it was therefore not required to pay TQL for the loss of the cargo. TQL argued in response that Globe Indemn. Co. does not apply, because there is an express indemnification clause in the contract entered into by TQL and JK & R governing the loss of cargo.

{¶ 8} The trial court granted summary judgment to JK & R on TQL's cargo-loss claim. The court determined that in order for TQL to prevail on the cargo-loss claim, TQL must satisfy the principles established for obtaining indemnification outlined in Globe Indemn. Co. The court determined that TQL could not show that it was legally liable for the loss of the cargo and that TQL did not satisfy the requirements to be entitled to indemnification under our decision in Globe Indemn. Co. after it had voluntarily settled the claim with Contél Fresh. The court concluded that TQL's right to indemnification from JK & R "has not been triggered."

{¶ 9} But the trial court granted summary judgment to TQL on its freight-brokerage-services claim, determining that JK & R was fully liable for the losses associated with the freight once the freight had been in its possession under the terms of the broker-carrier agreement. The court determined that TQL was entitled to $600 on its freight-brokerage-services claim.

D. TQL appeals to the Twelfth District Court of Appeals

{¶ 10} TQL appealed the trial court's judgment to the Twelfth District Court of Appeals. TQL argued that our decision in Globe Indemn. Co. , 142 Ohio St. 595, 53 N.E.2d 790, and its progeny do not apply to the facts of this case because of the express contractual provision regarding indemnification contained in the broker-carrier agreement.

{¶ 11} The Twelfth District, relying upon the decision of the Seventh District Court of Appeals in Wildcat Drilling, L.L.C. v. Discovery Oil & Gas, L.L.C. , 2018-Ohio-4015, 121 N.E.3d 65 (7th Dist.), rejected that argument. 2019-Ohio-20, 2019 WL 115204, ¶ 16. The court held that our decision in Globe Indemn. Co. applies to cases in which there was a written indemnification provision in the contract between the parties. The court concluded that in order for TQL to prevail on its contractual-indemnity claim, TQL must be able to satisfy its burden under Globe Indemn. Co. , which it did not do. Id. at ¶ 16-19.

{¶ 12} The court of appeals applied our decision in Globe Indemn. Co. , determining that TQL could be entitled to indemnification only if (1) it had given proper and timely notice to JK & R of the claim by Contél Fresh, (2) it was legally liable to respond to the settled claim, and (3) the settlement was fair and reasonable. Id. at ¶ 15. Because TQL had failed to establish the second requirement in Globe Indemn. Co. —that is, it failed to show that TQL was legally liable to respond to Contél Fresh's claim—the court of appeals concluded that TQL was not entitled to indemnification. Id. at ¶ 17, 19-21. The court of appeals thus affirmed the judgment of the trial court. Id. at ¶ 29.

{¶ 13} TQL appealed to this court, and we accepted jurisdiction to consider whether "[a] valid written indemnification agreement must be enforced as written in accordance with the intent of the parties and cannot be supplanted by the three Globe factors that are applicable only in the context of an equitable remedy." See 155 Ohio St.3d 1463, 2019-Ohio-1817, 122 N.E.3d 1285.

II. Analysis

{¶ 14} We address the issue in this case today in Wildcat Drilling, L.L.C. , 164 Ohio St.3d 480, 2020-Ohio-6821, 173 N.E.3d 1156. We determine in Wildcat Drilling, L.L.C. , that the requirements set out in Globe Indemn. Co. , 142 Ohio St. 595, 53 N.E.2d 790, for determining whether an indemnitee may recover against an indemnitor when the indemnitee has settled a claim without the indemnitor's involvement, do not apply when the parties express a clear intent to abrogate those common-law requirements in their contract. Wildcat Drilling, L.L.C. at ¶ 1.

{¶ 15} As we note in Wildcat Drilling, L.L.C. , Globe Indemn. Co. outlines three common-law requirements for indemnification. In order to be entitled to indemnification after a voluntary settlement, the indemnitee must prove that (1) proper and timely notice was provided to the indemnitor, (2) the indemnitee was legally liable to respond, and (3) the settlement was fair and reasonable. Globe Indemn. Co. at 604, 53 N.E.2d 790, citing Tugboat Indian Co. v. A/S Ivarans Rederi , 334 Pa. 15, 21, 5 A.2d 153 (1939) ; see also New York Cent. R.R. Co. v. Linamen , 171 Ohio St. 87, 88, 167 N.E.2d 778 (1960) (plaintiff did not establish a right to recover because plaintiff did not allege or prove that notice was provided to the defendant prior to settlement or prove that the settlement...

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